A financial analyst, Syndey Casely-Hayford is advocating for stricter regulations to guide the operations of Fund Management Companies in the country.
He believes that such a measure will help to discourage owners and directors of Fund Management Companies from mismanaging customers’ monies.
Speaking on The Big Issue on Saturday, Mr. Casely-Hayford said the minimum capital requirement for Fund Management Companies should be increased to about GH¢5 million to safeguard deposits of investors.
“GH¢2 million is not enough. They needed to do about GH¢5 million or GH¢ 10million in order to ensure that when you are doing certain things that could mean you could lose your license, you are going to think twice. The GH¢100,000 threshold was ridiculously low,” Casely Hayford said.
The Securities and Exchanges Commission in August 2019 increased the minimum capital requirement for Fund Management Companies from GH¢100,000 to GH¢ 2million and has given them a December 2020 deadline to meet the new requirement.
At the time, the Commission indicated that it was investigating 21 fund managers for sinking as much as GH¢5 billion in risky investments such as unlisted bonds, direct private equity stakes and related-party deals that are difficult to liquidate.
It noted that another GH¢4 billion had been tied up in fixed-term investments, which are now starting to trickle in after the government stepped in and bailed out failed banks with GH¢11.2 billion and microlenders with another GH¢925 million.
On Friday, November 8, 2019 SEC announced that it had revoked the licenses of some 53 Fund Management Companies.
It also announced that five others had voluntarily folded up.
Those whose licenses were revoked were found to have engaged in various infractions including engagement in related-party deals that were difficult to liquidate.
Sydney Casely Hayford also said the SEC must ensure that persons whose actions and inactions led to the collapse of the fund management companies are dealt with according to law, noting that ” there is a moratorium on setting up new fund management companies for at least 6 months,” a move he endorsed.
Prior to SEC’s action, there have been a series of protests by customers of fund management struggling to access their locked up cash.
Most of the protests were from customers of Blackshield Fund Management, formerly known as Gold Coast Fund Management.
Financial sector in crisis?
The latest action by the SEC adds to the series of action taken against other financial institutions by another regulator, the Bank of Ghana.
The Central Bank as part of its major sector clean up revoked the licenses of 347 microfinance institutions, 39 microcredit institutions, nine universal banks and 23 savings and loans companies.
This development is reported to have affected several hundreds of thousands of Ghanaians whose funds of various sums have been locked up with many of the collapsed institutions.
Receivers for the collapsed banking institutions are in the process of validating claims and making attempts to pay customers monies due them.
Processes are also underway to prosecute persons whose actions or inactions resulted in the collapse of the banking institutions.